I heard today that innocent are pulling their Veg Pots to focus on the core drinks business. This is what I suggested back in 2008, almost six years ago, in this post:
"The risk with the veg pot is that this "new toy" distracts management time and resources away from the core smoothies business. A shame, as there is still plenty of opportunity to grow the core (e.g. in the UK prompted awareness is c.85%, but trial is only 10%). Also, this is a time when the core business is under pressure"
brandgym blog readers agreed with these concerns, with 85% of people saying the launch would be a miss for inoocent in our 2009 hit 'n miss survey.
Well, fast forward to 2015 and the innocent website has the following announcement:
Since we launched innocent in 1999, we've spent most of our time making healthy, delicious, natural drinks. We've got some really exciting plans for our drinks over the coming years and we want to give those plans our full attention
Why has innocent decided to pull the pots? Below I re-cap two issues I raised in 2009, a year after the launch. Maybe one or both of these has persuaded innocent to re-focus on the core.
Will veg pots will be "a dwarf"?
The big question is will these pots make pots of money? My concern is not with the brand equity stretch. We can trust innocent to go from fruit to veg. And the funky new design and quirky pack copy are very innocent. No, the concern is with the business model stretch. Can innocent profitably create a new market sector, and get the product into peoples' repertoires, given a high price-point of £3.50 and a sub-contracting manufacturing model?
The only report I have been able to find suggest sales are c.£8million. And the fact innocent are advertising the veg pots suggest they must be doing OK. And credit to innocent for doing some good stuff with this brand extension: solves real consumer problem (what to have for lunch?), decent, tasty product and creating a new, premium segment.
However, compare this to the sales of smoothies at c.£100 million, and you get a slightly different picture. The veg pots are still dwarfed by the smoothie business. Now, as one smart Unilever manager asked at a recent workshop, "Is this a dwarf, or a toddler (that will grow to be big)?". As it stands, the veg pots look pretty dwarf-like. But, innocent think they have potential to grow. Net, I think we need more time to see what happens.
Also, I'd love to know the profitability of the veg pots vs. the smoothies, as in most cases new products make less profit than core products.
Risk of neglecting the core
The other issue raised, which has unfortunately come true, is the risk to the core business when stretching. I suggested that the time spent by management in 2008 on developing veg pots should have been spent on driving growth of the core smoothies business, and defending it against the launch of Tropicana. I shared this view with innocent founder Richard Reed when I met him at the innocent AGM back in Jan 2008, suggesting a need to drive distribution and also move down pricing to make the brand more accessible. This would also have protected the business against the ravages of the recession that was to come.
Well, unfortunately this bit we called right. UK smoothie sales fell 17% last year, a loss of £17million. In other words, twice the amount of new sales in veg pots. If effort had been focused on the core smoothies business, lets say half of this loss could have been avoided. This would have produced the same revenue result, but a much stronger business.
Conclusions
Neglect the core at your peril. The growth in sales from the new product seems to have ben more than off-set by loss in sales on the core. If you are going to stretch, ensure your protect enough time, effort and money for the core.
